The dip in some of the world's largest tech companies outweighed the gains of others that benefited the most from the economic recovery. That is why the S&P 500 declined, after rallying the previous day amid talks that central banks would shift to tighter policies to combat inflation without undermining the economy. The Nasdaq 100 also dropped because giants such as Apple and Tesla reported large losses.
Commodities, financial and industrial products, on the other hand, showed gains.
Policymakers are now weighing measures to deal with price pressures. But the European Central Bank wanted to balance risks to growth, so it announced that it will temporarily expand its regular monthly bond purchases by six months. This decision followed the Federal Reserve's move to speed up tapering, while forecasting rate hikes through 2024.
"While we expect increased stock-market volatility as the Federal Reserve embarks on normalizing policy, equity markets should end the year higher as the economy still remains strong," said Richard Saperstein, CIO at Treasury Partners. "This should lead to continued earnings growth."
Meanwhile, Brewin Dolphin CIO Janet Mui said: "I do think that central banks are being reactive, which is good. If inflation does start to moderate as these major central banks are still expecting, we may actually expect some turn in the policy direction in the later part of next year."
Talking about statistics, jobless claims in the US rose last week, but remained near the pandemic's lowest level. Housing starts also picked up in November, thereby hitting its highest rate in eight months. Factory output also advanced steadily.
Other key events for this week are:
- policy decision of the Bank of Japan (Friday);
- quarterly rebalancing of the S&P and Dow Jones indices (Friday).